Iowa Certificate of Authority / Penalty and termination
The penalty for operating in Iowa without authority, and how authority is lost
What happens when an outside entity operates in Iowa without authority depends on its type: a foreign nonprofit faces a civil penalty of up to $1,000 and a bar on suing in Iowa courts, while an LLC or business corporation is barred from suing yet faces no money penalty under those chapters. Authority can also be lost later: for any of them, a report or fee more than 60 days late opens the door to termination or revocation.
Three entity types, three sets of consequences
| Consequence | Nonprofit | LLC | Business corporation |
|---|---|---|---|
| Can it start or keep a case in an Iowa court? | No, until it has a certificate | No, until it registers | No, until it registers |
| Can it defend a case? | Yes | Yes | Yes |
| Are its acts and contracts valid? | Yes | Yes | Yes |
| Money penalty named | Up to $1,000 | None in the registration sections | None in the registration sections |
| Attorney general action | May seek revocation if the corporation abuses its authority | May seek an injunction | May seek an injunction |
Sources: Iowa Code 504.1502 for nonprofits, 489.902 and 489.912 for LLCs, 490.1502 and 490.1512 for corporations.
The nonprofit rules in full
A nonprofit transacting business without a certificate cannot maintain a proceeding in an Iowa court, and the same bar reaches its successor and assignee, until it obtains the certificate; a court may stay a suit while it decides whether the certificate is required. In addition, the corporation is liable for a civil penalty of an amount not to exceed $1,000 in total, and the attorney general may collect it. failure to obtain a certificate does not impair the validity of a nonprofit's corporate acts or stop it defending a proceeding.
The LLC and corporation rules
An unregistered LLC or business corporation is shut out of Iowa courts as a plaintiff, but it can defend itself, its contracts hold, and its owners keep any liability limit. A court can be asked by the attorney general to halt an entity that works in Iowa against the chapter. As for money, the sections of the LLC and business corporation chapters on foreign registration name no civil penalty for operating unregistered; they bar suing, allow an injunction and allow termination.
How authority ends: LLCs and corporations
Termination is available to the state when fees, taxes, interest or penalties unpaid sixty days after they are due; a biennial report not delivered within sixty days after it is due; no registered agent, or an agent with no place of business in Iowa, for sixty days or more; or no notice within sixty days that the agent or the agent's place of business changed, the agent resigned or the address was discontinued. A certificate of termination is filed and a copy goes to the agent, falling back on the principal office when none exists, and the effective date must be at least sixty days later. The registration ends on the effective date unless the company cures every ground before then, in which case the Secretary of State files a statement that the certificate of termination is withdrawn. A corporation follows the same pattern.
How authority ends: nonprofits
The Secretary of State may start revocation of a nonprofit's certificate of authority when a biennial report is sixty days late, there has been no agent or registered office for sixty days, an agent or office change goes unreported for ninety days, a false document was signed knowingly, or the home state certifies dissolution; the corporation gets sixty days after service of notice to correct each ground. Only after that sixty-day correction period may revocation be signed, and authority stops on the date the certificate of revocation shows.
After authority ends
Once a nonprofit's certificate is revoked, the Secretary of State is made its agent for process on claims from the authorized years, while its registered agent keeps authority. For an LLC or corporation, old claims can still be brought to the entity through the Code's process rules.
Coming into compliance
An entity that has been operating without authority can apply or register now, at $25 for a nonprofit or $100 for an LLC or corporation. The open questions below cover the earlier months.
Open questions
- How the amount is chosen below the nonprofit ceiling.
- Whether elsewhere in the Iowa Code an unregistered LLC or corporation faces a fine.
- Whether authority, once granted, reaches back across the months before it.
- Whether a terminated foreign registration can be revived.
Those four turn on the facts of each case, so put them to an Iowa business lawyer; the registration can be filed meanwhile.
Weighing the cost
A nonprofit comparing the $25 certificate with a $1,000 exposure and a closed courthouse has a clear choice. An LLC with Iowa customers faces no named penalty but cannot sue to collect. An entity whose Iowa contacts all fall on the exempt list has a different question, whether it needs authority at all, and our page on when authority is required takes it up.
Penalty questions
How big is the nonprofit penalty?
A civil penalty not exceeding $1,000 in total.
Does an LLC pay a penalty?
No money penalty is named in the LLC chapter, but the LLC cannot sue until it registers.
How late is too late for a report?
More than sixty days late is a ground for termination or revocation.
Our fee and Iowa's
We tell you which Iowa fee applies before you pay. An LLC and a nonprofit pay different amounts. $199 plus the state fee, including your first year of registered agent service; after that the agent service renews at $149 a year.
Get Iowa authority to operate
IA$199
+ the Iowa fee for your entity type, from $25
- The Iowa paper that fits your entity type, drafted from what you tell us
- The certificate of existence from home, ordered so it lands inside Iowa's ninety days
- An Iowa registered agent or office: ours, or your current one
- The filing sent and the state's record returned, with your report year marked
- Renewal: after the first year, the agent service renews at $149 a year
Sources
- Iowa Form 635_0106, nonprofit application for certificate of authority
- Iowa Form 635_0010, LLC foreign registration statement
- Iowa Code 489.903, foreign registration statement
- Iowa Code 490.1503, foreign corporation registration statement
- Iowa Code 504.1503, application for a certificate of authority
- Iowa Form 635_0110a, foreign profit corporation registration statement
- Iowa Code 490.122, business corporation fees
- Iowa Code 504.1502, consequences of transacting business without authority
- Iowa Code 489.911, administrative termination of registration
- Iowa Code 489.912, action by attorney general
- Iowa Code 490.1512, action by the attorney general
- Iowa Code 489.902, registration to do business
- Iowa Code 490.1502, registration of a foreign corporation
- Iowa Code 490.1511, administrative termination of a foreign corporation
- Iowa Code 490.504, service on a corporation
- Iowa Code 504.1531, grounds for revocation of a certificate of authority
- Iowa Code 504.1532, procedure for and effect of revocation
- Iowa Code 489.119, service of process on an LLC
Not sure which Iowa paper you need?
Name your entity type and home state and we will say what Iowa asks.